Is the Kiwi dozen beer’s new battleground?
Independent brewers have elbowed their way onto supermarket shelves in the last decade, but the “dozen” remains firmly in the grip of the big breweries. Shane Cowlishaw looks at whether that dominance could soon end.
If you head into the chiller section of a bottle store or supermarket, chances are it will be filled with boxes of mainstream lager.
The familiar blue and gold of Speight’s, the green of Steinlager, the white cardboard of Stella Artois and the orange of Tui have long dominated the bulk beer choices of New Zealanders.
But the beer industry as a whole has shifted dramatically in the past decade.
Small independent breweries have proliferated, raising the quality of beer and introducing styles never before seen in New Zealand.
The rise of what is often dubbed ‘craft beer’ expanded choices for consumers, although we have actually been drinking less in recent years.
That decline appears to perhaps be turning around, looking at the figures.
Stats NZ’s annual report on alcohol consumption will be released next month, but data for the year ended December 2016 showed the total volume of beer available rose 3.78 percent to 292 million litres.
Leading this revival has been beer over 5% ABV, which rose 17 percent in 2016.
More boutique brews have also had an impact on the price of a pint, with a 400ml glass of beer rising almost 50 percent since 2007.
That price rise has not extended to the price of a dozen packaged beers, however.
In the same time period, the cost of a 12-pack rose only 11 percent.
One explanation for this is likely the dominance of New Zealand’s three largest breweries – Lion, DB, and Independent Liquor – in the format.
The bigger the pack, the cheaper the price
Together, these three companies brew almost every beer available in larger pack formats.
Alongside more mainstream offerings they also control brands such as Tuatara and Panhead, which have retained their higher price point set when independent.
If you look under the supermarket top shelf, which is often full of glossy single-bottles and six packs from independent breweries, you won’t find much variety in the dozen category.
Dave Pearce, Lion’s innovation and insights director, said in classic fast-moving consumer goods theory smaller packs were often for trial or impulse purchases, while bigger packs catered for loyal buyers.
Generally, people expected a better deal in bigger pack formats so there was a lot of competition in the international lager and New Zealand draught categories.
This put pressure on margins, but if it resulted in selling more beer it could pay off, he said.
He noted a shift away from 500ml single bottles to multi-packs in the craft beer sector.
More established brands would eventually move into bigger pack formats and new players would continue to enter the market with individual bottles.
Depending on how you measured ‘craft’, it already represented 15 percent of the market and if it continued growing it could lead to a wider variety of beers being available in dozens.
“We’re in uncharted waters. We’re at 15 percent now, so what would it look like if craft got to 30 percent? It probably wouldn’t get twice the current space on the shelf, but you’d expect retailers to give it more space.”
Jos Ruffell, co-founder of Wellington brewery Garage Project, said it would take a huge investment to compete with the bigger breweries in the format.
They were set up to chase volume and the sheer amount they sold made it economically viable.
“We don’t necessarily want people drinking more of our beer in a volume nature, we want people to drink more beer because it’s unique and different.”
It was unlikely they would release a beer in a 12-pack, but if they did it would be a lower-alcohol beer such as their 2.1% Fugazi or a recently-released Shandy.
Ruffell said a country’s preference for packaging size was almost cultural, as in Australia, where they prefer to buy beer by the case (24-pack), spending $70-$90 at a time.
If Garage Project did release a large pack there would be a twist. Ruffell pointed to American brewery Austin Beerworks that put out a 99-pack.
Garage Project recently began brewing some of its beers at a new, independently owned production brewery in Napier called bStudio.
The brewery, featuring a top-of-the-line German brewhouse, will also brew beers for other brands.
It is understood bStudio’s size and focus on contract breweries allows it to offer far more competitive pricing than other facilities, potentially making the dozen category more economically viable for smaller breweries.
But Simon Gilbertson, founder of bStudio, refused to talk about the operation and said the company had a “zero media” policy.
He was unable to talk about deals in place with breweries or the specifics about how pricing could work for packaged dozens.
Making money tough
One brewery that has made its first foray into the dozen category is Good George.
The Hamilton-based business has grown rapidly since 2011 and this summer dipped its toes in the water with 12-packs of its 4.8% Summer Days Golden Kolsch and 5% Riot Time XPA.
Race Louden, the company’s chief executive, said 2000 cases of each beer had been produced and had sold well.
He believed more craft dozens would soon appear, but at a higher price point than their mainstream rivals and he challenged supermarkets to give them more prominence in stores.
“Supermarkets have a place here, if you go to a chiller they are full of 24-packs of Speight's and you don’t have to chill that stuff.”
The Good George dozens were selling for $40 each and Louden could not understand how breweries like Moa could be selling similar products at a cheaper price.
“I don’t know how they’re making any money selling their 12-packs for $22. They don’t have the scale of a Lion or DB. They’ve got to be making nothing.”
Moa is one of the few independent breweries that has aggressively challenged the major players in the dozen category.
It sets the price of its lager and pale ale at $24.99, with supermarkets often offering it on discount for as little as $21.99.
But the financial road for Moa has been rocky with shares currently sitting at 53 cents, down from the $1.25 they were first offered at when the company was floated.
General manager Gareth Hughes admitted it was a fine balance and requiring efficiencies in the supply chain, but argued the company was doing well in the larger format space.
Premium mainstream brands such as Heineken were moving into even bigger formats such as 15- and 24-packs and this was creating more room in the dozen space for smaller breweries.
“Our view is that as the craft beer landscape changes and more people get used to good beer they’ll move from single bottles to six-packs and then move to bigger packs," Hughes said.
“Part of that challenge is where you place your brand. There have been times when people say ‘We can get 12 beers of yours for 25 bucks but you can buy six beers for $22, what’s going on?’ so a big thing is about your brand and how you place yourself.”
Shane Cowlishaw is the co-host of The Beerhive podcast. You can listen and subscribe here.